Housebuilders are calling on the Scottish Government to take urgent action to alleviate the effects of the credit crunch.

Homes for Scotland, which represents companies building 95 per cent of the country's new houses, says jobs in the industry and government policies are in jeopardy.

Chief executive Jonathan Fair believes lenders are creating "a self-fulfilling prophecy" by their increasingly conservative approach to mortgage borrowing, which will in turn lead to job losses and a downturn for the economy.

Mr Fair believes the Scottish Government can reduce the impact of the mortgage crisis in Scotland by increasing local authority spending in the housing sector.

He said: "We would encourage the Scottish Government to increase it's spending now to encourage market confidence, with a slowing down of spending over the next two to three years to manage growth in the sector more effectively. The government is in a unique position to capitalise on greatly reduced land deals and completed homes at the moment, and could help the industry further by looking at the proportion of investment in shared equity deals, particularly for first-time buyers.

"It is vitally important for the Scottish Government to show strong political leadership to bolster consumer confidence.

Mr Fair said the banks are not passing on interest rate falls to consumers quickly enough, and their conservative approach to lending is crippling what is still a buoyant housing market in Scotland.

He added: "The banks are currently protecting their balance sheets in preparation for future losses, but the extreme knee-jerk reaction by lenders, and the overly conservative approach to lending, is creating a selffulfilling prophecy of a downward trend in the housing market and the economy in general.

"While Scotland remains in better shape than the rest of the UK - with research continuing to show static or moderate increases in house prices - no one should be in any doubt